Wilson: The New Freedom

No one ever rose more suddenly or spectacularly in American politics than Woodrow Wilson. In the spring of 1910 he was president of Princeton University; he had never held or even run for public office. In the fall of 1912 he was president-elect of the United States. Yet if his rise was meteoric, in a very real sense he had devoted his life to preparing for it. He was born in Staunton, Virginia, in 1856, the son of a Presbyterian minister. As a student he became interested in political theory, dreaming of representing his state in the Senate. He studied law solely because he thought it the best avenue to public office, and when he discovered that he did not like legal work, he took a doctorate at Johns Hopkins in political science.

For years Wilson’s political ambitions appeared doomed to frustration. He taught at Bryn Mawr, then at Wesleyan, and finally at his alma mater, Princeton. He wrote several influential books, among them Congressional Government and The State, and achieved an outstanding reputation as a teacher and lecturer. In 1902 he was chosen president of Princeton and soon won a place among the nation’s leading educators. He revised the curriculum, introducing many new subjects and insisting that students pursue an organized and integrated course of study. He instituted the preceptorial system, which placed the students in close intellectual and social contact with their teachers. He attracted outstanding young scholars to the Princeton faculty.

In time Wilson’s educational ideas and his overbearing manner of applying them got him in trouble with some of Princeton’s alumni and trustees. Although his university career was wrecked, the controversies, in which he appeared to be championing democracy and progress in the face of reactionary opponents, brought him at last to the attention of the politicians. Then, in a great rush, came power and fame.

Wilson was an immediate success as president. Since Roosevelt’s last year in office, Congress had been almost continually at war with the executive branch and with itself. Legislative achievements had been few. Now a small avalanche of important measures received the approval of the lawmakers. In October 1913 the Underwood Tariff brought the first significant reduction of duties since before the Civil War. To compensate for the expected loss of revenue, the act provided for a graduated tax on personal incomes.

Two months later the Federal Reserve Act gave the country a central banking system for the first time since Jackson destroyed the Bank of the United States. The measure divided the nation into twelve banking districts, each under the supervision of a Federal Reserve bank, a sort of bank for bankers. All national banks in each district and any state banks that wished to participate had to invest 6 percent of their capital and surplus in the reserve bank, which was empowered to exchange (the technical term is rediscount) paper money, called Federal Reserve notes, for the commercial and agricultural paper that member banks took in as security from borrowers. The volume of currency was no longer at the mercy of the supply of gold or any other particular commodity.

The crown and nerve center of the system was the Federal Reserve Board in Washington, which appointed a majority of the directors of the Federal Reserve banks and had some control over rediscount rates (the commission charged by the reserve banks for performing the rediscounting function). The

Woodrow Wilson, presiding over the 1906 Princeton commencement, walks beside steel magnate and educational philanthropist Andrew Carnegie.

Board provided a modicum of public control over the banks, but the effort to weaken the power of the great New York banks by decentralizing the system proved ineffective. Nevertheless, a true central banking system was created.

When inflation threatened, the reserve banks could raise the rediscount rate, discouraging borrowing and thus reducing the amount of money in circulation. In bad times it could lower the rate, making it easier to borrow and injecting new dollars into the economy. Much remained to be learned about the proper management of the money supply, but the nation finally had a flexible yet safe currency.

In 1914 Congress passed two important laws affecting corporations. One created the Federal Trade Commission (FTC) to replace Roosevelt’s Bureau of Corporations. In addition to investigating corporations and publishing reports, this nonpartisan board could issue cease-and-desist orders against “unfair” trade practices brought to light through its research. The law did not define the term unfair, and the commission’s rulings could be taken on appeal to the federal courts, but the FTC was nonetheless a powerful instrument for protecting the public against the trusts.

The second measure, the Clayton Antitrust Act, made certain specific business practices illegal, including price discrimination that tended to foster monopolies; “tying” agreements, which forbade retailers from handling the products of a firm’s competitors; and the creation of interlocking directorates as a means of controlling competing companies. The act exempted labor unions and agricultural organizations from the antitrust laws and curtailed the use of injunctions in labor disputes. The officers of corporations could be held individually responsible if their companies violated the antitrust laws.

The Democrats controlled both houses of Congress for the first time since 1890 and were eager to make a good record, but Wilson’s imaginative and aggressive use of presidential power was decisive. He called the legislators into special session in April 1913 and appeared before them to lay out his program; he was the first president to address Congress in person since John Adams. Then he followed the course of administration bills closely. He had a private telephone line installed between the Capitol and the White House. Administration representatives haunted the cloakrooms and lobbies of both houses. Cooperative congressmen began to receive notes of praise and encouragement, whereas recalcitrant ones received stern demands for support, often pecked out on the president’s own portable typewriter.

Wilson explained his success by saying, only half humorously, that running the government was child’s play for anyone who had managed the faculty of a university. Responsible party government was his objective; he expected individual Democrats to support the decisions of the party majority, and his idealism never prevented him from awarding the spoils of office to city bosses and conservative congressmen, as long as they supported his program. Nor did his career as a political theorist make him rigid and doctrinaire. In practice the differences between his New Freedom and Roosevelt’s New Nationalism tended to disappear. The FTC and the Federal Reserve system represented steps toward the kind of regulated economy that Roosevelt advocated.

There were limits to Wilson’s progressivism, limits imposed partly by his temperament and partly by his philosophy. He objected as strenuously to laws granting special favors to farmers and workers as to those benefiting the tycoons. When a bill was introduced in 1914 making low-interest loans available to farmers, he refused to support it. “It is unwise and unjustifiable to extend the credit of the Government to a single class of the community,” he said. He considered the provision exempting unions from the antitrust laws equally unsound. Nor would he push for a federal law prohibiting child labor;

Table 21.2 Progressive Legislation (Federal)

Such a measure would be unconstitutional, he believed. He also refused to back the constitutional amendment giving the vote to women.

By the end of 1914 Wilson’s record, on balance, was positive but distinctly limited. The president believed that the major progressive goals had been achieved; he had no plans for further reform. Many other progressives thought that a great deal more remained to be done.